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GLOBAL EQUITY REPORT December 5, 2009
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DJIA: 10,388.90 10-YR TSY: 3.48% CRUDE OIL: $75.70
COMP: 2,194.35 GOLD: $1,161.40 $USD INDEX: 75.75
S & P 500: 1,105.98 SILVER: $ 18.47 VIX: 21.25
“If you have an approach that makes money, then money management can make the difference between success and failure... ... I try to be conservative in my risk management. I want to make sure I'll be around to play tomorrow. Risk control is essential.”- Monroe Trout
US MARKETS:
Greetings stock fans. For the past several weeks, US equities markets have continued to consolidate at the upper end of the range while printing new 52-week highs on an intra-day basis, yet unable/willing to break-out in full bloom mode, as of yet. With Q3 earnings season behind us and in the ‘rearview’, market participants have focused on economic data releases as their primary ‘tell’ in determining the mood and temperature of the tape where we’ve been the recipient of a ‘mixed bag’ of data. Hence, the continued range-bound action with a poke ‘here-and-there’ above previous highs, yet unable to do so on a ‘closing’ basis, thus far.
Nevertheless, as we have been referencing in our previous scribes of the past weeks/months, the tape remains in decent shape from a technical perspective with the ‘staircase’ pattern of higher lows and higher highs in the Spoo’s (S&P 500) remaining intact, as well as all three major indices ‘appearing’ to now be moving in synchronized harmony with each ‘knocking on the door’ seeking higher ground, as it was just a few short weeks ago where both the S&P and COMP were lagging the leadership of the DJ Industrials.
With market participants returning in full this past week after observance of the Thanksgiving holiday, US markets logged another positive week of trade with all three major indices finishing a shade of green as the COMP led the way, posting gains of 2.6%, followed by the SPX which tacked on 1.3%, while the DJIA’s finished fractionally higher with gains of less than 1% (0.8%). However, as previously noted, we continue to trade at the upper end of the range and ‘appear’ to be consolidating awaiting further cards from the deck to be revealed via Mr. Market as evidenced by the chart below:
As one can decipher from the picture above, the sideways bump-and-grind action of the past several trading weeks persists, while relative strength remains neutral evidenced by its RSI 56 reading, as well as the MACD hovering, yet not clearing, the 0 line, as of yet.
Thus, as we noted last week, “nothing much has changed/altered with the technical landscape of the Spoo’s as the index remains in a healthy posture trading above its moving averages in the ‘staircase’ pattern of higher lows and higher highs. Until or unless this pattern is interrupted (a lower low is put in on a ‘close’) the tape continues to warrant the bullish benefit of doubt and should continue to be acknowledged and respected.”
Furthermore, we also went on to state, “While relative strength finds itself in a neutral posture with its RSI 50 reading, as well as the MACD hovering at the 0 line, such may ‘appear’ to be suggesting short-term indecisiveness,” which presently remains the case this week as well.
Therefore, while nothing has changed/altered within the landscape during the past several weeks, at least from a technical perspective, and the bullish benefit of doubt remains in the hands of buyers, we have noticed the tape giving-up its early gains on an intra-day basis (Friday) and some of which have been large gains, only to find late-day selling pressure (distribution) into the bell, which we find somewhat disturbing. While such activity and behavior has as of yet to inflict significant technical damage on the tape itself, the action has and will continue to garner our attention in the days/weeks ahead (should it persist) and readers may well take note!
GLOBAL MARKETS:
After a tumultuous prior week of trade where news of Dubai World’s ‘potential’ default on $60 Billion in loans rattled the globe (particularly overseas), global markets/bourses responded with a favorable week of trade last week with equities markets/bourses posting gains across the board and ‘seemingly’ putting the prior week’s news developments behind them and in the ‘rearview’. As a result, Asian markets littered the screens green with the entire region finishing on the plus side of the ledger as the Shanghai Composite; Hang Seng; BSE 30; Jakarta Composite; KLSE Composite; Singapore Straits and Taiwan Weighted all finished with gains, while recent laggards, the Nikkei 225 and Seoul Composite also finished with strong gains, whereby the former was able to ‘toe-the-line’ (hold) at the 9K level and recapture the all important psychological 10K barrier, for the moment. Nevertheless, many of the Asian markets/bourses continue to trade at the upper end of their ranges and display fairly decent technical characteristics, albeit, both the Nikkei and Seoul Composite have further work to do in order to ‘right the ship’. As for ‘Down Under’, both the All Ordinaries and NZ 50 finished the week in the green, as the former continues to display a bit of ‘Dandruff’ via its ‘potential’ H&S pattern remaining intact, while the latter remains in its multi-month channel. Moving on to Europe, the CAC; DAX and FTSE responded in kind during last week’s trade with all three posting advances for the week and much like Asian markets/bourses, as well as that of the US equities markets, remain at the upper end of their respective ranges. The global ‘Re-flation’ via central banks certainly seems to have global equities markets moving in ‘harmony’ as the world remains ‘awash’ ; in cheap (excessive) money/debt (supply)!
BONDS:
With US equities markets logging another week of gains, ‘Treasury Land’ was the recipient of outflows as money flowed to equities and prices ticked lower and the yield higher on the 10-year, closing out 27bps on the positive at 3.48%, well within our longstanding zone of 3.2%-4%. Although we’ve come close on a few occasions of ‘breaching/violating’ the lower end during the past couple of months, the ‘Note’ has yet to do so on a ‘closing’ basis, albeit we did witness an intra-day breach/violation in early October, as well as a ‘test’ of the 3.2% figure in late November, only to hold on the goal-line. Nonetheless, until either end of the spectrum is ‘breached/overcome’ on a ‘close’, we remain within the zone.
METALS:
Having finished on the positive side of the ledger twenty-three (23) of the past twenty-seven (27) trading sessions and putting in several nominal all-time highs during its course, Gold finally succumbed to selling pressure late this past week where the ‘yellow metal’ was ‘roughed-up’ in Friday’s session with a loss of $46 and change, yet, despite the nasty south-side shuffle, finished out the week of trade lower by 1.3% at $1161.40, while Silver, after going ‘topside’ of the $19 level intra-week, pared some of its early gains but, managed to finish the week with gains of 1.3%, closing out at $18.47. Moving forward, Gold finds ‘potential’ short-term support at $1150-55, as well as perhaps more significantly, the $1100 figure, while $1225 (recent highs) will more than likely act as ‘potential’ resistance/headwinds in the days/weeks ahead. As for ‘Hi-Ho Silver’, it should find ‘potential’ short-term support at the $17.50/$18 area, while the $19.50 level may act as ‘potential’ resistance/headwinds in the days/weeks ahead. While Friday’s steep and powerful move lower in Gold may have shaken many, remember, nothing goes up or down in a straight line without interruption or pausing for breath (consolidation). As we’ve been noting for the past couple of weeks, both gold and silver were getting a bit ‘frothy’ from a short-term perspective and in need of some consolidation/pause in order to ‘catch a breath’ and that is ‘seemingly’ what we are in the process of witnessing. The secular bull remains alive and well as we await the conclusion of Phase II, which will be interrupted by a corrective phase before we move forward with Phase III of the secular bull, which when arrives, will be of the jaw-dropping spectacular variety in the months/years ahead!!
CRUDE OIL:
After breaking-out of a multi-month channel in early October, crude remains in consolidation mode, trading in a sideways pattern, yet continues to demonstrate decent technical characteristics despite its slippage this past week of trade, where oil slid the ‘slippery slope’ to the tune of 2.4%, closing out at 75.75bbl. While ‘black gold’ remains within our referenced ‘potential’ support of 75, as well as ‘potential’ resistance residing at the 82 figure, with this past week’s close, oil now finds itself trading below both its 20 and 50-Day moving averages respectively, and should continue to be monitored with a close eye. Although neither end (support/resistance) of the spectrum has failed to ‘give way’ on a ‘close’ thus far, both the 75 (support) and 82 (resistance) levels should continue to serve as guidelines moving forward. Until or un less either end ‘gives way’ on a ‘close’, we remain range-bound.
CURRENCIES:
After spending the majority of the week trading at the 74.5 level, the $USD index sprinted higher on Friday on the heels of a better than expected employment report, which resulted in unemployment falling from 10.2% to 10% with employers cutting staff at a reduced rate (11K vs. anticipated 125K). As a result, the ‘greenback’ welcomed the news and powered higher to finish the week with a 1.2% gain, closing out right at our often noted declining 50-Day moving average at 75.75. While further work is required for the ‘Buck’ to mend it ways and a ‘clearing’ of the declining 50-Day moving average would be a start, ‘potential’ resistance lies ahead at the 76.50 level, as well as the 77-77.50 zone. On the flip side of the ledger, should the ‘greenback’ stumble and revert to its old ways and breach/violate its recent lows (74.25ish) on a ‘close’, such may usher in further selling pressure where the 71-72 area would once again be ‘in play’. Thus, while Friday’s impressive thrust into higher ground was impressive and ‘may’ be the start of better things to come for the $USD index, more work is required and readers may wish to monitor the aforementioned levels for further clarity with respect to direction in the days/weeks ahead.
US Markets:
Short-Term: Neutral- Mixed Signals-Consolidating
Intermediate-Term: Neutral- Ditto- Mixed Signals-Consolidating
Long-Term: Bullish- SPX 1,000 Has Been ‘Re-Captured’
(Yet, within the confines of a secular-Multi
Year Bear based on Weekly charts)
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